Corporate risk management

The type of business in which the Group operates, the volatility of market conditions and the possible deterioration of clients' and partners’ financial position can cause cash inflows that are potentially not time-consistent with cash outflows and with costs related to the debt. These factors expose to the liquidity risk and to the credit risk, arising from the possibility of default by a trading counterparty (i.e. delays and/or non-payments or to be forced to provide for the financial obligations of partners). Furthermore, the Group is exposed to numerous financial risks, such as:

·       reduced availability of bank guarantees necessary for the bids’ submission and for the projects’ execution, which may involve both Saipem and the partners selected for the project;

·         exposure to fluctuations in interest and exchange rates;

·         possible downgrading in the credit rating assigned by the principal rating agencies.

Mitigation

The management, control and reporting of financial risks are based on the Financial Risk Policy, issued at corporate level with the aim of standardising and coordinating the Group’s policies. It includes escalation procedure to be followed if predefined risk thresholds are exceeded.

The Company, right from the negotiation phase, discusses with clients the terms and conditions that protect it in terms of financial exposure and monitors its contracts to maintain positive or neutral cash flows.

In addition, the Company is also constantly engaged in monitoring the evolution of the financial markets and in strengthening and increasing partnerships with financial and insurance institutions, included local ones, to increase its guarantees.

Saipem carries out a significant part of its activities in regions which are potentially unstable from the political, social and economic point of view. Developments in the political framework, economic crises, internal social unrest and conflicts with other countries and increase in the risk of terrorist attacks, could expose the human and material assets to potential damage, as well as impair its ability to operate under economically advantageous conditions, and require specific extraordinary measures, where possible in compliance with Company policies, in order to continue the activities.

Other risks related to the activities in those geographical areas include:

·       lack of stable legislation and uncertainty on the protection of the rights of the foreign company in case of breach of contract by private entities or State entities, including risk of expropriation and nationalisation;

·       detrimental development or application of laws, regulations, unilateral contractual changes that result in the impairment of assets, forced divestments and expropriations;

·         various restrictions on construction, drilling, import and export activities;

·        imposition of international economic sanctions in the financial, energy and or technological sectors;

·         increases in applicable taxation;

·         internal social conflicts, acts of terrorism, vandalism or piracy;

·         lack of or limited insurance cover for country risk, war risk and terrorist attacks.

Mitigation

Saipem has adopted a model to assess and manage risks, which is fully compliant with the principles and guidelines provided by the standard ISO 31000 and is inspired by the criteria of prevention, precaution, protection, information, promotion and participation, with the aim of reducing the risk deriving from the actions of individuals or legal entities, which could expose the company and its human and material assets, image and reputation to potential damage.

The security model meets the requirements of D.Lgs n.81/2008 and  D.Lgs. n. 231/2001 and the adopted risk management approach is coherent with the Company values and objectives, in order to positively impact the economic, social, patrimonial and reputational value of the Company, contributing to improve its resilience and maintain its production capacity stable.

Saipem is committed to constantly and closely monitoring political, social, and economic developments, terrorist threats and potential impacts deriving from international sanctions in the countries of interest, both through specialised Group resources and through providers of security services and information analyses.

Saipem uses agencies that provide security services in the countries in which it operates, to:

·         Ensure a safe and secure workplace for all workers including third parties;

·         Protect intangible assets and corporate know-how;

·         Protect the integrity and reputation of management and stakeholders;

·         Ensure the monitoring of physical and cyber security events impacting on Saipem;

·         Manage emergencies and crises in coordination with other company functions;

·         Provide specialized support to business activities, right from the development of commercial initiatives;

·       Guarantee a travel security management (TMS) process ensuring the tracking of expatriates and the correct training/information on specific risks linked to the work environment and the relevant country context.

In the management of security activities, Saipem pays utmost attention to human rights respect and adopts preventive measures to avoid an active response by private security forces, in case of threats to the safety of its people and to the integrity of the assets. The Company manages relationships with local security agencies by sharing its commitment to human rights respect and adopting rules of engagement that limit the use of force. It also maintains close contacts with the local authorities/embassies in the countries in which it operates, and at a central level with the National Agency for Cybersecurity, the Crisis Unit of the Ministry of Foreign Affairs, and other public institutions. Before finalizing a contract, suppliers of security goods or services are subjected to a due diligence process to verify that there are no shortcomings related to the violation of human rights.

When ability to operate is temporarily compromised by political or social instability arising in the country, demobilisation from the site is evaluated for the protection of personnel and corporate assets; as soon as favourable conditions are restored, the resumption of activities is planned in order to limit operations disruption, always guaranteeing safety conditions.

Saipem operates in countries where biological agents are present and could cause diseases in people exposed to them. The situation very much varies and changing over time: over the years there have been more, or less extensive epidemic outbreaks of both diseases already present in the area, imported diseases and recently diseases associated to climate change and increasing invasion of natural habitats by humans. The Group’s personnel in these countries are therefore potentially exposed to infectious diseases when carrying out their activities; any outbreaks of diseases could represent a significant risk both in terms of impacts on staff health and possible indirect impacts on the Group's financial results and assets such as interruptions, slowdowns and cost increases in project execution and postponement of investment decisions in the affected sectors, disruptions in the supply chain, delay in client payments, increased risk of litigation (e.g. related to commercial contracts, labour and insurance matters) and complexity of resource turnover due to quarantines and travel restrictions.

Mitigation

Through epidemiological analysis on open sources and data collection in the territory, Saipem is committed to constantly and punctually monitor the occurrence and evolution of all infectious diseases in the countries where it operates and intends to operate and to implement timely measures to prevent and respond to outbreaks.

The company runs numerous awareness-raising campaigns among its staff in order to increase risk awareness and knowledge of the most effective prevention measures. Regular hygiene and health inspections are carried out at the operating sites and personal protective equipment and vaccine and chemoprophylaxis measures are made available to the workforce. Control programmes of vector-borne disease are in place at all risk sites. Occupational medicine protocols and the travel medicine service are an effective system for protecting the health of workers, and medical evacuation contracts are a guarantee for the safe evacuation of infected patients.

Saipem works with a large number of suppliers and subcontractors, spread across different geographies and with different levels of experience, in some cases selected to comply with local content requirement coming from the clients. Their performance may be inadequate with respect to project requirements, resulting in additional costs related to the need to implement plans to meet the client’s expectations and possibly causing delays in project execution and delivery. Moreover, during the project execution, the purchase orders can be revised due to changes in the scope of work, in the completion and delivery date (due to delays and/or accelerations) and to unexpected updates in local regulations, generating change orders and claims towards Saipem.

Saipem is also exposed to the risks connected to the interruption of supply chain (for example in case of sudden and unpredictable deterioration of the geopolitical scenarios), to the bottlenecks in some production sectors (in terms of raw material availability, production capacity and delivery times) and to volatility of commodity price (such as steel, nickel, copper, fuel, etc.)  but also, of goods and services used in the execution of projects. Indeed, materials and goods purchased by the Group require transport and warehousing services to reach the operating sites and they too may be subject to delays, limitations on availability and/or price increases, especially in times of high demand and in case of sudden interruption of the supply chain.

The Group may not be able to transfer or share with its clients the price increases and delays caused by above mentioned dynamics, which could lead to the deterioration of business relations with clients and changes in the financial results, with a negative impact on Saipem’s performance.

Mitigation

The Company has implemented a structured qualification and selection system geared towards working with reliable suppliers and subcontractors with an established reputation. The performance of suppliers and subcontractors is also constantly monitored and subject to feedback at all stages of the contractual relationship, in order to pursue continuous improvement of the procurement process and project execution, through Bidder Vendor Lists always updated.

With the aim to prevent and mitigate the risks of unavailability and price variability of goods, materials and services, Saipem monitors the impacts on each single projects, in terms of continuity, prices and timing of supplies and suppliers' production capacity, establishing an ongoing dialogue with them. When the conditions are right, project-based commercial agreements with suppliers are defined (e.g. pre-agreements, strategic agreement to ensure availability of production sites already in the bidding phase, etc.) or, alternatively, Saipem agrees with suppliers on price change formulas that can then be accepted in full or in part by its clients. Moreover, right from the project budgeting phase, Saipem uses specific tools to monitor and possibly prevent impacts on the supply chain due to the availability and volatility of commodity prices, services and inflation and to include reasoned price adjustment formulas.

The achievement of Saipem's strategic objectives depends on the protection of the company's information assets and the resilience of its Information Technology (IT) and Operational Technology (OT) systems. IT and technological systems are exposed to the risk of potential cyber-attacks, which can affect the safety of people and assets, the confidentiality, integrity and availability of company information and lead to economic, financial, legal and reputational impacts.

The improper use of Artificial Intelligence systems by malicious actors could amplify the chances of success of attacks and their negative impacts. Companies’ supply chain is currently particularly targeted, the vulnerabilities of the actors which are part of it are exploited to attempt to penetrate the defensive measures implemented by the companies targeted by cyber criminals.

Mitigation

Saipem has developed a cybersecurity model that adopts a holistic approach in managing risks involving the safety of people, processes and information technologies within the digital ecosystem in which the Company operates, inspired by the reference international standards, such as the "National Framework for Cybersecurity and Data Protection", "NIST Cybersecurity Framework" and the ISO 27014 standard "Governance of information security".

Saipem considers the human factor one of the main risk factors for IT systems; therefore, it developed and implemented a cyber awareness plan to increase the level of preparation and awareness of employees. In addition, Saipem considers continuous collaboration with key public and private stakeholders to be of paramount importance.

The protection of the company's information assets, under the responsibility of the CISO (Chief Information Security Officer) of Saipem S.p.A., is implemented through the adoption of adequate set of measures aimed at preventing or mitigating any losses deriving from deliberate or accidental actions that may involve tangible and intangible assets.

With reference to the cyber risk, the company is particularly committed to the following objectives:

·         the protection of company information and know-how;

·         protection of the integrity of IT assets;

·         compliance with the requirements and expectations of stakeholders

Saipem continues to maintain the ISO/IEC 27001 "Information Security Management System" certification, regarding the "Monitoring of events and management of cyber security incidents" process.

With reference to drilling and offshore construction fleet, the ISM Code, supported by IMO resolution MSC.428 (98), required the assessment of the cyber risk and the implementation of organizational and mitigation measures on board. These measures have been implemented as part of the Safety Management System, following the guidelines issued by the International Maritime Organization IMO in July 2017 (MSC-FAL.1/Circ.3).

Furthermore, in order to continuously improve its supplier qualification and selection system, the Company has implemented a qualification process in the new Vendor Management system which also incorporates cyber security requirements. Depending on the outcome of the assessment, the adoption of additional actions by suppliers may be required to comply with Saipem's cyber security standards.

Finally, Saipem uses IT service providers to constantly monitor the evolution of threats and the main prevention and defense tools available on the market. With reference to new Artificial Intelligence (AI) technologies, a multidisciplinary working group was created with the aim of:

·         monitor regulatory developments at European and Italian level (i.e. AI Act currently under preparation by the European institutions);

·         regulate the adoption of these technologies on the European market;

·         analyse emerging risks and evaluate any impacts caused by the implementation of these tools/projects within the Group.

Saipem is a global leader in the engineering and construction services for large projects in the energy and infrastructure sectors, both offshore and onshore. The overall demand in these sectors is influenced by multiple factors, such as the trend in global energy supply/demand, OPEC policies, uncertainty in the markets, geopolitical factors, technological evolution, environmental policies and regulations, etc. often interconnected and/or interdependent with each other. These factors are difficult to predict and influence the investment policies of the main clients, exposing Saipem to:

·         delays in the negotiation process and possible non award of commercial initiatives relating to future projects;

·         cancellation and suspension of projects already under way and delays and difficulties in obtaining payment of contractual penalties to indemnify the Company;

·         strengthening of the level of aggression in commercial strategies by the competitors;

·         delays and difficulties in obtaining change orders for the scope of work requested by the client or in renewing contracts for offshore drilling fleets prior to the expiry thereof and under economically advantageous terms and conditions;

·         claims and arbitration and international disputes in the most significant cases.

The reference market is also defined by the various mergers and acquisitions, the creation of joint ventures and alliances on a local or international level, of a strategic or commercial nature, and the continuous development and commercialisation of patents and licences by competitors for innovative solutions in the energy transition sector. In fact, the energy transition is based on the development and use of new technologies in areas such as renewable energy, decarbonisation of many industrial sectors, energy efficiency and circular economy.

Inadequate forecasts of the evolution of the market scenarios and of the competitive and technological landscape may expose the Company to the risk of not being able to implement its Strategic Plan, both in terms of the volume of new acquisitions and related margins, and in terms of revenues and margins of the existing portfolio, leading to negative impacts on the strategic and competitive positioning, both in Oil&Gas conventional services, and in Infrastructure and services related to the energy transition, whose weight is less significant in the short term, but whose trend shows an increasing weight in the medium and long term.

Mitigation

To monitor the trend of demand, Saipem makes use of a capillary organisational structure to cover the areas of interest, and of companies specialised in providing periodic analyses and estimates on relevant market segment trends and on macroeconomic, geopolitical, and technological developments.

To ensure a strengthening of its competitive positioning, Saipem always strives to create valuable relations with its clients and guide them through the developments of the global energy scenario, while respecting the values and professional ethics. The Company management pursues various business opportunities with a global perspective on the reference markets, adopting a diversification criterion among the several clients in the energy sector (International Oil Companies, National Oil Companies, Independents, Utilities).

The Company created the Sustainability, Scenarios and Governance Committee, which is responsible for assisting the Board of Directors in its review and development of scenarios in order to prepare strategies, based on the analysis of the relevant issues for long-term value generation and the corporate governance of the Company and the Group.

Saipem strategy is characterised by the presence of an approach which aims to target traditional sectors, where it can claim a more competitive positioning (offshore construction and drilling) and, on a medium and long-term, to enlarge clients and market portfolio and growth in high-tech sectors linked to the energy transition and defence (such as for example plants for renewable sources, carbon capture projects, production of green hydrogen and its derivatives, plastics recycling, construction of high-speed railway lines).

The Group has worked constantly on the research and development of technologies aimed at increasing energy efficiency in operations and offering clients sustainable solutions for the decarbonisation of energy and for their energy transition path.  Therefore, Saipem continues to investigate new technological frontiers, to update its know-how and renew its assets.

The Company operates mainly in the highly competitive services sector for the energy and infrastructure industry, executing complex works and projects for its clients. 

The contract award is preceded by an offer phase, during which Saipem develops execution schemes, timing and budget estimates; the processing of budget and the price definition are the result of a detailed and accurate estimation exercise which incorporates, through the use of contingencies, appropriate risk assessments. During the multi-year project’s execution phase, the actual costs may vary from the estimated amounts for reasons related to external factors (such as, for example, interruptions in the supply chain, the country’s geopolitical situation, etc.), but also to changes in the execution program due to unexpected operational, technical and/or technological complexities.

These factors can lead to additional costs, delays in execution, non-recognition or delayed recognition of revenues resulting in a reduction of originally estimated margins and a worsening of collections and financial exposure, with potential damage to Group’s reputation.

Mitigation

Saipem has undertaken a path to improve and rationalize its processes and activities, particularly in relation to the strengthening of the estimates processes, control system and risk management.

In order to improve the management of projects, both in bidding and execution phase, actions have been undertaken for the dematerialisation and digitisation of several processes in the engineering, procurement, and construction phases, for the centralisation of strategic/significant activities and to increase synergies and spread of lesson learned among the execution centres.

These initiatives were accompanied by a new organisational model based on distinct business lines characterised by different dynamics, objectives and competencies:

·         “asset-based service”, based on a rigorous discipline of optimisation of drilling, vessels and fabrication assets, and focused on key geographies and clients;

·        “offshore wind” for the bidding, design and execution activities of offshore wind plants;

·        “energy carriers” for the design of complex plants or their low-carbon reconversion with an increasing focus on the best risk/return balance and with greater attention to margins;

·         “sustainable infrastructures” for growth in a sector that has become strategic in the new ecosystem of energy transition and sustainable mobility;

·         “robotics & industrialized solutions” for the development of modular, repeatable, scalable plants and monitoring and maintenance services based on digital technologies.

The Group’s operation depends significantly on the use of technologies, assets, patents, and licences it holds, and of IT systems developed through the years. Saipem considers the technological and digital component to be particularly relevant for projects in the Robotics & Industrialized Solutions business line; the focus of these projects are innovative products linked to emerging energy transition markets.

Given the rapid and constant technological evolution in these areas, the failure to take advantage of the opportunities linked to the digitisation and transformation of operational processes and activities (e.g. automation) and the failure to adopt innovative IT solutions could jeopardise the Company's technological, cultural and renewal development and consequently negatively impact the achievement of its short- or long-term objectives.

Mitigation

The Company has launched several initiatives aimed at achieving a better efficiency and effectiveness and particular emphasis has been placed on the rationalisation of business processes and on the progressive cultural, technological, and digital change. Specifically, initiatives aimed at the dematerialisation and digitisation of activities continue.

Saipem is engaged in the implementation phase of the digital transformation project through an agenda with several objectives, including increasing efficiency of the ICT services, developing a new HR management system, spreading digital awareness and adopting new technologies, among them Artificial Intelligence. Saipem has also set up various ICT business initiatives focused on the progressive digitisation and automation of business work processes and the enhancement of corporate data and information assets. To this end, a shared data model and a data governance methodology based on the Common Data Environment (CDE) methodology have been implemented and will be progressively extended on a collaborative technology platform.

Finally, the Company has in place activities aimed at preventing and mitigating exposure to the risk of threats to data security, as part of the processes established by the company information systems.

In the ordinary course of operations, the Group may take part in disputes which, if not resolved by negotiation, may result in judicial or arbitral proceedings, including lengthy ones that require significant resources, costs and legal expenses. The Group is currently a party to civil, criminal, administrative and tax proceedings. The estimate of expenses that could reasonably be expected and the amount of provisional funds are based on information available at the date of approval of the financial statements or interim financial statements, but may be subject to updates and revisions, including significant revisions of estimates as legal proceedings progress. Even if  the Group has carried out the necessary assessments, also on the basis of applicable reporting standards, it is not possible to exclude that the Group might in future have to face payments for damages not covered by the provision for legal proceedings, or which are covered insufficiently, or which are uninsured, or which are of an amount greater than the maximum sum that may have been insured.

Any unfavourable outcome of disputes or new disputes could result in significant repercussion on the reputation, with a subsequent negative effect on image in the mass media or with clients and partners.

Finally, changes in national tax regimes, tax incentives, rulings with tax authorities, international financial treaties and, in addition, risks related to their application and interpretation in the countries where the Group companies operate, expose to tax-related risks which could result in disputes in some of those countries.

Mitigation

Saipem not only implements actions aiming to constantly strengthen its internal control system, but also makes use of specialised external consultants who assist the Company in judicial, civil, tax or administrative proceedings. Furthermore, the Board of Directors of Saipem monitors the evolution of the main legal proceedings in an active and continuous manner.

Saipem constantly monitors both the changes in and compliance with tax regulations, also in order to minimise the impacts due to its operating activities in all countries of interest, through internal resources and tax consultants.

In order to execute EPCI projects, drilling services and other services in the energy industry, the Group has several assets (specialised vessels, drilling rigs, FPSOs, equipment, fabrication yards and logistics bases). Any operational performance of these assets that is lower than expected (e.g., due to delayed maintenance, inadequate planning of asset availability windows with respect to the needs of existing and future projects, etc.) could jeopardise the performance of activities, with negative effects on the time and cost of projects being executed and on client relations.

In addition, should the Company be unable to guarantee the operational performance and/or availability of assets, the Group may have to adjust its targets, with consequent impacts on its business, prospects, reputation, as well as its economic, asset, and financial situation.

Mitigation

Saipem is constantly engaged in maintaining, updating, and renewing its assets with the aim of adapting its service offering to the current and future needs of the market, to carry out its business.

Should proprietary assets not be suitable and/or available to meet project needs, Saipem makes use of third-party vessels under “Long Term Charter”/ “Bare Boat” type contracts and external production yards to ensure that activities can be carried out and the objectives of the four-year plan can be achieved.

The Group relies to a significant degree on the professional contribution of key management personnel and highly specialised individuals, which, on the basis of their skills and experience, are vital to the execution of projects and to the growth and development of Saipem. Furthermore, working on international markets, the development of future strategies will depend significantly on the ability to attract and retain highly qualified and competent personnel with a high level of diversity in terms of age, nationality, and gender.

The ability to attract, motivate, and retain qualified resources in all functions and geographic areas represents a crucial success factor and its deterioration would expose Saipem to the risk of losing resources with a relevant know-how, with a subsequent medium-long-term negative effect on activities, prospects, and the economic, financial and capital situation.

Finally, frequent changes in the labour laws of many of the countries in which it operates expose Saipem to various kinds of risks in the management of human resources, due to the volatility and uncertainty of local regulations; the uncertainty of the law in these countries may cause internal inefficiencies and litigation.

Mitigation

Saipem is committed to investing in gender, nationality, and generational balance, encouraging the development and growth of younger resources, as well as motivating and retaining the most experienced resources, to ensure the protection of the distinctive and strategic skills. With this aim, several specific initiatives focused on the promotion and dissemination of an inclusive culture have been launched through the partnership with the “Valore D” and “Parks-Liberi e Uguali” association.

Saipem has been included for the first time in Bloomberg's Gender Equality Index (GEI), an internationally accredited index that aims to track the gender-data reporting of public companies and has obtained the certification for gender equality from the Norwegian DNV.

The aim of Remuneration Policy is to attract, motivate, and retain high-profile professional and managerial resources, and align management’s interests with the aim of creating value for shareholders in the medium-long term.

Saipem has adopted a skill-based innovative model for the management of human capital with the aim of better directing energies and professional figures to the areas in need and ensuring greater flexibility in the development of personal and professional skills at all levels. Therefore, the expansion of the Group into different business lines is accompanied by plans to employ and train management and technical personnel, both international and local, with a wide range of skills, as well as job rotation programmes.

Saipem also oversees the international labour markets both through its network of local structures and through the company Global Project Services AG, which guarantees the recruitment of international personnel worldwide. It monitors the legislative developments relating to personnel management in all the countries in which it operates or is interested in entering, with the support of labour law consultants.

As defined in the Code of Ethics, in full compliance with applicable legal and contractual provisions, Saipem undertakes to offer equal opportunities to all its employees, making sure that each of them receives a fair statutory and wage treatment exclusively based on merit and expertise, without discrimination of any kind.

Saipem's activities may potentially expose it to accidents, which may cause negative impacts on the health and safety of people and the environment. Saipem’s activities are subject to the laws and regulations for the protection of the environment, and on health and safety, at both Italian and international level. Despite the best efforts, the risk of incidents that are detrimental to people's health and to the environment cannot be completely ruled out.

Such events could lead to criminal and/or civil penalties against those responsible and, in some cases, to violations of safety and environmental regulations, also pursuant to the Italian Legislative Decree No. 231/2001. This would lead to costs arising from the fulfilment of obligations under environmental, health and safety laws and regulations, leading to costs related to sanctions against Saipem and impacts on its image and reputation.

Besides, in order to execute EPCI projects, drilling services and other services in the energy industry, the Group owns numerous assets that are subject to both normal operating risks and catastrophic risks related to weather events and/or natural disasters, which may cause impacts on the safety of people and the environment. The risks connected with ordinary operations can be caused by mistaken or inadequate execution of manoeuvres and work sequences, of ordinary and/or extraordinary maintenance, etc. Despite the fact that Saipem has specific know-how and competencies constantly kept up to date, that it has implemented internal procedures for the execution of its operations and regularly carries out maintenance work on its assets in order to monitor their quality and level of reliability, it is not possible to fully exclude the occurrence of incidents.

Mitigation

Saipem has developed an HSE (Health, Safety and Environment) management system which is in line with the requirements of laws in force and with international standards ISO 45001 for health and safety in the workplace and ISO 14001 for environmental management, and for which Saipem has obtained certification for the whole Group. Specifically, HSE risk management is based on the principles of prevention, protection, awareness, promotion, and participation; its aim is to guarantee the workers’ health and safety and to protect the environment and the general well-being of the community.

Regarding the risks related to the safety and health of people, Saipem has introduced a series of specific mitigation initiatives, among which it is worthy to mention the “Leadership in Health & Safety” (LiHS) programme (aimed at strengthening the Company's health and safety culture), “Life Saving Rules” (aimed at promoting awareness of dangerous activities and actions that each individual can carry out to protect themselves and others), “Dropped Objects Prevention” and campaigns such as “We Want Zero”, “Keep Your Hands Safe”, “Work Safe – No Regrets” (aimed at tackling accidents related to working at heights, launched in response to a negative trend in accidents related to working at heights) and “Fire Prevention”. Also ongoing is “Choose Life”, a training programme that aims at strengthening leadership and increasing awareness on health and well-being issues, with the objective of encouraging people to choose a healthier lifestyle. The first psychological help desk, that can also be used in the metaverse, has been recently created, available free of charge and anonymously for the employees.

Pilot projects have been launched for the use of innovative digital technologies and Artificial Intelligence in HSE areas, including the "Safety Step Up" Program, "step-change" actions, the progressive implementation of the electronic work permit (E-Permit to Work) for the entire fleet to strengthen on-board safety management, the development of advanced occupational health and health surveillance activities and the extended application of telemedicine services (teleradiology, telecardiology and teledermatology).

Regarding the risks associated with safeguarding the environment, Saipem has developed a structured system of prevention, management, and response to spills and several mitigation initiatives are ongoing, among them: measures to eliminate the risk of spills (e.g. substitution of hazardous substances with eco-friendly substances, mapping of areas at greatest risk of spills and identification of appropriate prevention measures) and, if this occurs, measures and actions to prevent them from spreading, the identification of asset-specific maintenance programmes aimed at preventing fluid leaks, various campaigns aimed at promoting and raising employees’ awareness on issues related to the environment, biodiversity and the efficient and sustainable management of all natural resources in general and initiatives aimed at increasing environmental awareness, etc. Saipem promotes initiatives focused on saving water and managing water risk, for example the creation of the Water Management Plan.

Lastly, for the mitigation of the risks related to asset management, Saipem incurs significant expenses for the maintenance of owned assets and has developed various prevention initiatives, such as the implementation of the Asset Integrity Management System, a system that provides for the systematic management of critical elements, the identification of Key Performance Indicators and the creation of task familiarisation cards for managing the development of personnel assigned to specific roles or the use of critical equipment. Specifically, with regard to all vessels in the Group’s fleet, Saipem periodically renews certifications issued by the appropriate classification bodies and by flag state authorities following the inspections that the classification bodies perform onboard. In addition, the vessels, based on the technical characteristics and the type of each ship, must meet the requirements of applicable international maritime law and laws regulating the Oil&Gas industry.

In the execution phase of EPC Lump-Sum Turnkey projects, there may be changes to the contractually agreed work that result in additional costs related to the changes requested by the client (change order) and/or higher costs incurred for reasons not attributable to the client (claim). Saipem and its clients cooperate to find agreements on the additional fees that satisfy both parties to avoid compromising the correct performance of works and delaying the completion of the project.  Delays and difficulties in reaching agreement and in the recognition of compensation related to change orders and claims may be a source of delay in payment and cause a deterioration of project margins. Moreover, should Saipem and the client fail to agree on additional fees, the Group could be involved in disputes that could even result in judicial or arbitration proceedings and cause a deterioration in client relations and loss of future business opportunities.

Mitigation

Saipem is constantly striving to maintain solid and positive relations with its clients and it performs checks on standard contractual terms to protect itself in each jurisdiction of reference, negotiating clauses with clients to protect also against possible geopolitical (sanctions) and macroeconomic (commodity price increases) risks. In addition, Saipem has launched various initiatives aimed at improving efficiency and effectiveness both in the contract negotiation phase, on the basis of a risk appetite defined and approved by the Board of Directors of Saipem SpA, and in the process of preparing the documentation supporting the claim and change order request, for a more timely communication of deviations from contractually agreed work.

Saipem actively participates in industry associations that promote the development and updating of contractual schemes aimed at optimising the balancing of risks, an activity that is particularly relevant with reference to the renewable energy business characterised by technological innovations and non-standardised contractual schemes currently on the market.

Although Saipem conducts its business with loyalty, fairness, transparency, integrity and in full compliance with laws and regulations, it has adopted and constantly updated in Group companies an Internal Control and Risk Management System (SCIGR), a Code of Ethics and a Model pursuant to Italian Legislative Decree no. 231/2001, as well as an organisational, management and control model with reference to Group companies located in foreign countries, and carries out periodic audits, conducts contrary to company procedures and regulations or unlawful acts may occur and could have negative effects on the Group's economic and financial situation and reputation. In addition, Saipem operates in several countries with a high rate of fraud and corruption and relies on subcontractors and suppliers who may engage in fraudulent conduct in coordination with employees to the detriment of the Company.

Saipem is also exposed to risks related to the protection of information and know-how as, when performing its activities, it relies on information, data and know-how of a sensitive nature, access to which and circulation by unauthorised employees or third parties may lead to fraud or illegal activities, with consequent damage to Saipem.

Lastly, it cannot be excluded that non-compliance issues or the incorrect application of the European Data Protection Regulation (GDPR) may occur within the Group, which could result in the application of sanctions to the detriment of Saipem.

Mitigation

Saipem has developed an “Anti-corruption Compliance Programme”, a detailed system of regulations and controls for the purpose of preventing corruption, in line with international best practices and with the principle of “zero tolerance” expressed in the Code of Ethics. In particular, “Anti-Corruption Compliance Programme” is dynamic and is constantly focused on the evolution of the national and international regulatory framework and of best practices.

In addition, Saipem’s Code of Ethics (included in Model 231) establishes that “corruption practices, illegitimate favours, collusion, solicitation, [occurring] directly and/or through third parties for personal and career advantages for oneself or others, are without exception prohibited”.

In order to encourage the submission of reports, Saipem makes various communication channels available to employees and stakeholders, including, but not limited to, ordinary mail, yellow boxes, dedicated e-mail boxes, communication tools on the intranet/internet sites of Saipem SpA and its subsidiaries and a dedicated information channel, overseen by the Compliance Committee, through which it is possible to report any problems related to the internal control system, financial reporting, corporate administrative liability, fraud, or other topics (i.e. violations of the Code of Ethics, mobbing, theft, personnel security, etc.).

Saipem periodically performs general audits also using external consultants, considering fraud indicators and red flags, in addition to those specific on suspected offences.

Furthermore, over the years, Saipem has developed a management system that has received the International Standard ISO 37001 - Anti-Corruption Management Systems certification. This is an important safeguard in the prevention of and fight against corruption, as it defines the requirements and provides a guideline to help organisations prevent, detect, and respond to corruption and comply with anti-corruption legislation and any other voluntary commitments applicable to their activities.

Saipem is aware that the first step for the development of an effective strategy against corruption is to know all the available tools for the prevention of corrupt behaviour. In this regard, Saipem personnel are engaged in training activities related to the Organisation, Management, and Control Model and Anti-Corruption regulations. Moreover, in order to mitigate and prevent risks related to possible unethical behaviour by suppliers and subcontractors, Saipem uses various tools, audits and training programmes and requires suppliers, subcontractors and partners to read and accept Model 231, including the Code of Ethics.

For the management of risks related to the leak of confidential information, Saipem uses IT security technologies and cyber security procedures has also adopted principles and rules to be followed by the Group in its internal management and external communication of corporate documents and information, with particular reference to inside information.

Lastly, beginning in April 2018 Saipem developed an ad hoc Privacy Organisation Model aimed at guaranteeing compliance with the European directive on data protection (General Data Protection Regulation - GDPR). This model was renewed in December 2022 to continuously improve and strengthen safeguards regarding the protection of personal data.